Emerging shipping risks

4 mins read

The FINANCIAL — The shipping industry has undergone considerable transformation over the past 100 years, but there are still many risks for the sector.


According to Allianz insurance, there are also risks emerging from changes in the industry itself and also from changes in the social, economic and political context of shipping.


Despite great strides in workplace safety, ship building is still comparatively dangerous work. A report by the UK Maritime and Coastguard Agency calculated that the occupational fatality rate for seafarers is twelve times higher than average in the UK. The rate of fatal accidents is two and a half times higher than in the construction sector and eight and a half times higher than in manufacturing.

Many of the current risks in shipping are generally associated with "human element" issues or "human factors". Like in other industries, that can mean problems in organizational management, mistakes by individuals and a lack of sufficiently competent workers.

A main concern moving forward is the high rate of marine casualties caused, at least in part, by human error, which a recent analysis determined to be 75-96 percent. AGCS UK Marine Claims Manager, Kevin Whelan says, "Going back over the years, the human error component is on the increase. So, while safety has improved overall, when there is a casualty the human error element is more likely to be the cause." Fatigue is a common cause of accidents. This problem, which has dogged the shipping industry, shows no signs of immediate improvement as competition drives down ship crewing levels and turnaround time for ships in port. Recent steps meant to address fatigue on board are relatively easy to circumvent and their introduction has not been wholly successful.

An analysis of accident investigation reports over a ten year period from 2002 to 2011 from the UK, Australia, US and New Zealand, found that of 427 available reports fatigue was listed as the main cause of an accident in 3.7 percent cases and was a contributory cause in 5.2 percent of cases. It remains a significant current risk.

Inadequate risk management is also frequently identified as the main cause of accidents. In this same study, the Seafarers International Research Centre found that in 29.3 percent of cases inadequate risk management was the main cause of an accident and in 9.8 percent of cases it was a contributory factor.


Plague of piracy — There is also rising concern about piracy, especially in the Gulf of Aden region. The industry has battled piracy with some success for many years, but the situation in the Gulf of Aden is more difficult given the lack of an effective government in Somalia and the enormous poverty there which makes income from ransom appear attractive. Piracy is now endemic in the region, with levels of violence from pirate attacks increasing. According to the ICC International Maritime Bureau, pirates hijacked 28 ships off the Somali coast in 2011, taking 470 hostages. Fifteen people were killed in those attacks.

Satellites have also revolutionized communication. The Titanic's radio had a range of 200 miles. Nowadays personnel aboard ships anywhere in the world can remain in touch with those ashore, 24 hours a day. In the day of the Titanic, this was only possible by transmitting from ship to ship, if a ship was close by. The radio officer also had to be at his/her monitoring station. The first distress messages the Titanic transmitted were missed by the nearby Carpathia as the radio officer was on the bridge.


Competing clash — Pressures of competition also pose a continuing safety risk. For example, the Herald of Free Enterprise was lost in 1987 when shore-based managers put pressure on sea-staff to speed up their port turnaround, a pressure that remains today.

The Torrey Canyon environmental disaster in 1967 has been attributed to a number of human errors. Management pressured the master to keep to a strict schedule, prompting him to enter port during ebb tides to avoid a wait. Then, the master decided to go through the Scilly Islands without a copy of the guide for that area, instead of around them as planned. Lastly, an equipment design error allowed the steering selector switch to be left on autopilot without any indication of the setting at the helm. Thus, the Torrey Canyon ran aground, spilling some 120,000 tons of crude oil.

However, competition can also enhance safety. Paul Newton, UK Head of Hull & Liability, AGCS, says that competition prompts many charterers to look for the safest provider. "In this respect, charterers who have high ethical and high moral standards are in some ways pushing the safety culture," he says.


Technology concerns — Non-original parts in engines are also a safety concern. These parts may not be tested or manufactured to the same standards as original parts and may become faulty. These parts may also slip into the supply chain fraudulently, and there is an additional question of whether parts produced under license are of the same standard as parts produced by the original manufacturers.

Mis-declaration of cargoes is also a fire hazard, despite the implementation of the IMO's International Maritime Dangerous Goods Code regulating the safe stowage of hazardous cargoes. When container contents are not listed accurately or poorly understood, they may be stowed in unsuitable areas, increased the fire risk.

Older tonnage is viewed as higher risk than newer tonnage, which is built to better construction rules and arguably in better condition. However, there appear to be exceptions for some ship types, and surprisingly some older ships tend to be regarded by risk analysts as relatively "safe".


Safety first — Safety management systems introduced by the IMO in its ISM Code have certainly done much to improve shipping safety. However, they still offer scope for further progress. One problem is that the ISM Code is written in general terminology for all types of vessels and operations. Thus, while company safety policies and procedures have to be sufficiently detailed to control their specific operations, the SMS auditor defines what is sufficient, not the Code.

Tim Donney, Global Head Marine Risk Engineering, Allianz Risk Consulting, says: "I've seen great variances in companies with the application of their safety management systems. Some people really embrace it and get a lot out of the process, but others are just looking for any way they can gain compliance, get their certificates, and keep operating. They typically buy off-the-shelf programs and just follow minimum guidelines. If we could get more consistency and raise the standards overall, that would be a better way of improving safety. That said, I do believe that we are definitely on the right track with safety management systems, and we should continue to pursue them."



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